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Divvying up the proceeds

City of Sequim officials are holding discussions with representatives of Insco Insurance Services to hash out the details of disbursing a $138,000 bond purchased to ensure the completion of work on the Fair Weather subdivision in Sequim. The bond was purchased by Sequim developer Gerald Engler, who walked away from the development in 2006.

The discussion is of great interest to Fair Weather residents, who say the bond funds are insufficient to complete the improvements they were promised when they purchased property in the subdivision.

They blame the city for the lack of funding, noting that three years ago Bill Bullock, then the city’s interim director/city engineer, made the decision to allow Engler to reduce the original bond amount by more than $700,000, from $840,336 to $138,347.

At the time, Bullock said completing the necessary work would cost just more than $110,000.

Sequim realtor Colleen McAleer is following the discussion on behalf of Anchor Savings Bank, which now holds title to 24 lots within the subdivision. McAleer said current contractor estimates suggest it will cost $61,000 to complete the interior roads and another $58,000 to bury utility lines and put in sidewalks along the bordering edge of West Sequim Bay Road. An additional $63,500 is needed for widening the southern half of West Sequim Bay Road along the edge of Fair Weather.

That’s $182,000, she said — $43,000 more than is available.

Further complicating the discussion is the city’s belief that the interior roads are private and therefore no public money can be spent on their completion.

Sequim City Engineer David Garlington has come up with slightly different figures, saying he believes the total to finish the public portion is $133,590. He agrees another $61,000 would be required to finish what the interior roads.

City Attorney Craig Ritchie confirmed he and other City of Sequim officials met for “preliminary discussions” with the bond company. Ritchie said Insco is now considering “some form of interpleader action in court,” he said. In an interpleader action, the court would determine “who gets the money,” Ritchie said. “Since the bond is made out to the city as beneficiary, that seems like a no-brainer.”

McAleer said if the city is awarded the bond money, officials may choose simply to spend $133,590 on the “public” portion of the unfinished project, leaving little or nothing for the completion of the interior roads, which remain a high priority for the residents and lot owners.
Making a case

The city, Anchor Savings Bank and the Fair Weather Lot Owners Association each will argue their cases before the court.

Robin Auld, president of the Fair Weather Lot Owners Association, disagreed with Ritchie’s statement that the case is a no-brainer. Auld, an attorney, said he wouldn’t discuss the details of the case until it is presented to the judge, but the “facts that will be discussed in court will create a far different impression.”

Auld said the city shouldn’t hold Fair Weather residents responsible for any underfunding that results from the bond’s release.

In the meantime, Ritchie said, “The city and, my guess is, all of the interested individuals and companies will continue to try to find a solution to completion of subdivision infrastructure — public and private.”

Nevertheless, he said, “This first step (interpleader) is helpful ... to everybody.”

Auld noted there also is a contract in place in which Anchor Bank would sell its 24 lots to Green Crow, a Port Angeles company. If that takes place before the interpleader action, Green Crow could replace Anchor Savings Bank in the court action or it could choose not to participate.
Who is responsible?

Ritchie said the city is aware of the immediate stakes. “We are mindful of the road-building season, current road construction pricing, the local development economy and the specific facts of this development.”

McAleer said the city now finds itself between a rock and a hard place. She said reducing the bond violated the city’s own code, which states, “There shall be no reduction in a bond amount.”

“Simply stated, the City of Sequim’s own code requires a guarantee to be in place to ensure all infrastructure is completed and no home-owner or lot owner is left ‘holding the bag.’ The city’s own public works director/city engineer eliminated this guarantee and now the city is looking to have some other entity pay for their decision to remove that full guarantee. This is simply unacceptable,” she said.

McAleer also took exception to the statements by city officials that public funds cannot be spent on private roads, noting the four improvements Bullock listed that needed to be covered by the bond included the “final asphalt overlay of interior streets” — a project on which the city now says it cannot spend public money.
A new plan

McAleer said that as Engler attempted to develop Fair Weather he borrowed money from three different banking institutions. All three of the banks have foreclosed on the properties that were secured by those loans.

McAleer said the Anchor Savings Bank supports the Fair Weather Lot Owners Association’s request that the city manager “coordinate with the bonding company to pay out the $138,347 of insurance bond to pay for the interior road asphalt, to bury the power lines and to build the sidewalks.”

McAleer said the remaining funds, if any, should be retained by the city until the city completes the widening project of “the entire length of West Sequim Bay Road.”

McAleer also wants the city to release “the Fair Weather Lot Owners Association, all lot owners of Fair Weather ... and any future developer of subsequent phases of the subdivision from any conditions” that were applied to the creation of the subdivision.

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